IRS Releases Long-Awaited Report on Hospital Pay and Services
The IRS concluded that the standards for reasonable compensation and community benefit “have proved difficult” for the revenue service to administer. “Both involve application of imprecise legal standards to complex, varied, and evolving fact patterns,” the IRS said. “Some have suggested that these standards need to be revised. As these discussions occur, and despite the limitations described [in the report], the study provides important information.”
In a statement, Sen. Charles E. Grassley, Republican of Iowa, said he was “disappointed that the IRS didn’t provide guidance to the hospitals on how to define community benefit and uncompensated care, so the numbers are likely to be overstated in some cases.”
Mr. Grassley, the senior Republican on the Senate Finance Committee, said he was also disappointed that the study does not include data on for-profit hospitals’ level of uncompensated care and other community benefits and compensation. “That information is necessary to understand how nonprofits are different from for-profits,” he said. “I intend to ask the IRS to conduct a study like that so we’ll have a full picture.”
Mr. Grassley said that “neither the IRS nor Congress has done a very good job when it comes to establishing the criteria” for nonprofit hospitals since the IRS adopted the community benefit standard in 1969. That standard modified an earlier IRS ruling that based the tax-exempt status of hospitals primarily on the provision of charity care.
“The Treasury Department could do a lot of good, and probably more quickly than Congress, by re-establishing those charity-care requirements,” said Senator Grassley. “And if it looks like that can’t get done, then Congress will have to step in.”